This guest post comes from our friends at Intuit, the masterminds behind TurboTax and QuickBooks. They recently hosted an event at Lyft HQ to provide guidance for tax season, and compiled their answers to drivers' most common questions below. Read on to get ready for Tax Day — and remember, that's April 18.
1. Which miles are included in Lyft's annual summary? The standard mileage deduction counts every mile driven while you're in driver mode, starting from the beginning of the 2015 tax year. It doesn't matter if a passenger is in your car or not — miles are tracked whether you're driving to your first passenger, heading to their destination, or between rides.
2. What's the ‘standard mileage’ method for calculating vehicle deductions? You can deduct any miles you drove in driver mode, including the miles spent en route to pickups, between rides, and while you have passengers in the car. In order to claim this deduction, you'll need to keep a detailed mileage log that includes the date, start and end times, purpose, and beginning and ending odometer readings of every trip.
Lyft's annual summary has a record of all miles you drove while in driver mode. We recommend using a mileage- and expense-tracking tool like QuickBooks Self-Employed to ensure that you have a comprehensive mileage log that's IRS compliant.
3. What's the ‘actual cost’ method for calculating vehicle deductions? That means you can only deduct the costs associated with your self-employed work. For example, if half of your $100 fuel fill-up is used for Lyft driving, you can only deduct $50 of it. The important thing to note is, if you use the 'actual cost' method for the first year that your car's in service, you can't switch to the 'standard mileage' method later. If you're planning on driving with Lyft in the future, you might want to use the standard method to keep your options open. Learn more.
4. Should I use the ‘standard mileage’ or ‘actual expense’ method to calculate my vehicle-related deductions? If you drove over 10,000 miles during the tax year, you'll likely get the highest deduction using the 'standard mileage' method. If you drove less than that, you might overpay your taxes if you don't use the 'actual cost' method. The best way to find out is to keep track of both, then choose the method that yields the higher deduction. See two examples.
5. What's the self-employment income threshold for filing a return? If you totaled at least $400 in net earnings (also known as 'profit’) from self-employment, then you need to file a return for that income. Learn more.
6. What's the difference between Lyft's tax forms? First things first: All Lyft drivers receive a yearly summary, but not everyone gets a tax form. Drivers will receive a Form 1099-K if they've given 200+ rides or generated $20,000+ in gross ride receipts in the last year; drivers will receive a 1099-MISC if they have earned $600+ in the last year from non-driving activities like referral bonuses or Mentoring.
7. What if I have multiple cars? You should only file the car(s) that you drive with Lyft. (And remember, if you use the 'actual cost' method, you'll need to use it for your vehicle's lifetime.) Learn more.
8. What if I drive for more than one ridesharing platform? That doesn't affect filing. From a tax perspective, even if you drive for multiple platforms, you're still considered one ridesharing and/or logistics business. So, you only need to complete one Schedule C form. Learn more.
9. How does depreciation work? Keep in mind that you can only claim depreciation if you're filing taxes using the 'actual cost' method. Get started.
10. Are there any tools for categorizing my expenses and filing my annual taxes? Yep! You can reach out to an accountant or tax preparer, or you can manually manage expenses and file yourself. We recommend using QuickBooks Self-Employed. It's a low-cost solution that allows you to automatically track mileage, import deductions directly from your bank, and file online with TurboTax.